Originally published in 2014

Question:

What steps have you taken to unload used machinery, and what strategies have you found to be most effective in reducing your used equipment inventory?

Answers:

“If you want to sell it, advertise it (website, Craigslist, etc.) If we really need to unload used inventory, we will sell it to a wholesaler. If we trade right on it, that is usually what happens to the ‘junkier’ stuff we get. When we get junk, we need to be able to move it quickly and get our money back. Fortunately, we are not in that 42% bracket that is over loaded with used inventory. I would love to get some more good used tractors in here to sell.”

— Rick Bailes, Bill’s Tractor, Adkins, Texas

“No question, this is the biggest issue facing most dealers in the Corn Belt and it is one that will probably be there for quite some time. As opposed to how it has been the last few years, dealers will have to go back to being much more proactive in prospecting and suspecting. While many buyers who used to purchase used equipment became new buyers due to the economy, dealers will need to hit the road and be creative to put together those deals that will assist them in making a dent in the excessive amounts of used inventory. There is no magic wand that can be waved to make the inventory disappear. It will have to go away the old fashioned way. We will have to sell our way out of the dilemma.”

— Mark Foster, Birkey’s Farm Store, Inc., Attica, Ind.

“We have taken a hard look at our older used and if we needed to take our lumps we are doing it. Newer used is still moving OK because late in 2013 we lowered our given trade values. We use a quota system for each salesman and added a used unit quota also. For example, if one new combine is sold, three used must also be sold to maintain balance. We will not be afraid of shutting off new sales if used inventory of like units do not stay in line; it has the salesman’s attention. Also, we do not pay commission until previous trade has been sold. Salesmen must have skin in the game.”

— Todd Channell, Farmers Equipment Inc., Urbana, Ohio

“We are going to try, once the snow melts, having a section in our used yard — The Not So Hot Lot. We do not have all of the details worked out yet but would put the machines that are marginal or need work there and sell them at a low price. ‘Here it is, what you see is what you get.’”

— Gene Saville, Lamb & Webster, Springville, N.Y.

“First let me begin by saying we are a strong used dealer, we actively search for and buy additional used above and beyond what we take in trade. With that being said, there are some real tough issues in the used equipment liquidity, primarily these are around the ‘large, high usage units.’ As we have watched a market develop with strong bifurcated distributions, no one wants these units at any price except for salvage. Our approach is to search out multiple bids at the wholesale/salvage level prior to trading for a unit. This has worked well on tractors and combines, but not so well on hay tools. The used hay tool market has failed to respond to discounts or attractive financing if the unit is ‘high capacity and high usage,’ this is my primary concern in today’s market. Used planters and tillage equipment have responded correctly to price adjustments as we have made them. We are actively searching for late model, low hour tractors in the 75-125 horsepower range. This area of the market is under supply pressure and very competitive.”

— Kenny Bergmann, S&H Farm Supply Inc., Lockwood, Mo.

“We have switched our focus from new to used, especially with combines. We are one of six locations and used inventories are always on our minds. For example, we had an opportunity to sell 5-6 new combines in December, and as hard as it was to not do it, we declined because of the number of late model used combines in inventory. We did get the used down to a manageable level, but I don’t want to get back to where I started.

“I think the market has changed and we are seeing softer trade-in values. I’m not a big fan of trading equipment and immediately wholesaling it out. The jockeys make a living selling used equipment so when they give me a number they think a piece is worth, I look at it and decide whether or not I can profit by keeping it and selling it myself. If I think I can’t, I let them have it and move on.

“I think the key moving forward is having the trades in at a fair price. If another dealer is on the deal and is willing to put a lot more money in a trade, then we need to be able to walk away. I can’t get ‘bigger’ or ‘better’ if I’m out of business. Our customers are important to us and I believe they all, or most, do understand the cost of doing business.”

— Ken Mast, New Holland Tri County, Bluffton, Ind.

The Successful Equipment Remarketing Strategies series highlights the best practice strategies employed by top farm equipment dealers to promote and sell used equipment. It is brought to you courtesy of Iron Solutions.

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“When we negotiate a deal for equipment, our sales people are instructed to have two to three potential prospects for that trade, especially when it is a higher dollar unit. For the most part, we do a very good job of this. Many times, that trade is sold before it ever gets to the dealership. We have used local auctions for some of the lower priced, lower quality pieces with mixed results but that is OK, as these are marginal pieces at best. We have run some off-brand nicer pieces through online auctions. We have been pretty pleased with the results of those. We run a monthly ad in two regional farm publications. We get good results from those ads. But, our very best approach to moving the good used equipment is to run Tractorhouse and Fastline print advertising. The results we have seen are amazing, and that will continue to be our main thrust in moving our used inventory.”

— Dave Colvin, Lowe & Young, Inc., Wooster, Ohio

“We have used online auction services weekly to work it down to the correct level, while at the same time aggressively selling it with our own people.”

— Don Van Houweling, Van Wall Equipment, Perry, Iowa

“The problem of high inventories exists because too many dealers bow to the pressures of manufacturers. The problem is usually identified as ‘the dealer has too much inventory’ or ‘we cannot sell the equipment fast enough to keep ahead of the interest costs,’ but I would argue that the problem is different.

“I believe a dealer should sell enough iron, new and used combined, that his area of responsibility can handle. With everyone chasing market share goals, they have forgotten to monitor whether or not their trade area can absorb the trades. I believe it is a poor business strategy to rely on a bunch of strangers from across North America to take away my overage of equipment instead of the customer base I have grown to know and understand. So how do we effectively reduce our used inventory?

“We keep all of our salesmen focused and rewarded only for serving the farmers in our area and have one used equipment manager selling to dealers out of area. On top of that, we have a new equipment manager who controls how much new iron we sell so that we don’t get caught with too much used. His forecasts are heavily weighted by historical performances of our AOR, so every year we get better at the game.”

— Darren Nickel, Greenvalley Equipment Inc., Morden, Manitoba

“We are being a lot more careful when trading for equipment that is questionable. We ask several people across our organization who have experience with a certain piece of equipment about their opinion on trade-in values. This gives three or four more sets of eyes on the subject to prevent over allowances. We call wholesale buyers to see what they will pay also. I have been in this industry for over 45 years, it constantly changes and values can change just as quick if a farming practice moves in another direction.”

— Randy Elium, James River Equipment, Salisbury, N.C.

“We have reduced the price on our 12 month and older units by 20% to see if that will make it move. We are looking at options if this doesn’t work. Maybe some very low finance terms.”

— Verlon Spencer, Baltz Equipment, Pocahontas, Ark.

“We currently have only two used pieces on the lot, so we are in very good shape in that department.”

— Jim Morse, Jim’s Equipment Repair, Campbell, N.Y.

“We are incentivizing our salespeople to sell used inventory rather than new whenever possible. We understand this may hurt market share in the short term, but it is what we need to do. We are also working to extend annual customer rolls from one-year rolls to two years and are converting some new roll customers to second tier buyers.

“We cannot continue to roll new product without knowing where we are going to go with the trades. We have also clamped down significantly on what we will trade for; minimum trade difference requirement, only one-for-one trades and like-for-like trades. We are also looking at recent auction pricing when valuing trades, so our trade values have dropped considerably. With the market so full of used equipment, we feel our best outlet for our inventory is in our local market, so our focus is to drive used sales in our area and limit the dollars in trades we are taking in.”

— Rob Rosztoczy, Stotz Equipment, Avondale, Ariz.

“We are in the process of moving some items straight through the dealership and not keeping them on the lot. We are taking all offers on any used equipment seriously to see if we can work out a deal. We move items from one store to another to give it a ‘fresh’ look since we have four stores. There is a possibility of refusing to take a trade on a used piece. It is possible to finance them, but there are no trades on used equipment.”

— Jayme Finafrock, Smith’s Implements Inc., Chambersburg, Pa.

“I believe there is more used equipment on dealers lots now than ever before. We use online auctions, local auctions and Internet advertising. On local deals, we offer a one-crop warranty on the newer units. We also work with people on the freight. We bargain with them on the price depending on how badly we want to move the unit. We try hard to clean up the used equipment and make needed repairs as necessary. Sometimes we have to sell below cost just to clean up our lot to make room for other deals. A plugged pipeline just doesn’t work.”

— Dave Ott, Fallon Welding, Fallon, Nev.

“There is no one source working to unload used inventory. We have put additional incentives on the salesforce to concentrate their efforts in order to reduce used tractor inventory.”

— James Sommer, Service Motor Company, Dale, Wis.

“The biggest factor in having too much used around is booking the trade too high. We have to be very careful on values not being so high that a low price at an auction is no longer an option. The real value is auction price, so people need to do their homework on valuation.”

— Bevan Jones, Rollins Machinery, Langley, B.C.

“We are not trying to unload used equipment. Rather, with the impending Tier 4 pricing increases, we have seen the values of our used equipment inventories appreciate. Our used inventory turns are actually quite high at the moment.”

— Josh Ahearn, Ahearn Equipment Inc., Spencer, Mass.

“I don’t have any sure method of coming out ahead. You just have to go to work everyday and keep on top of the situation. If we have excessive inventory and drawing interest, we will trade until we go broke. There will be lying and cheating going on while we go broke. My father gave us some wisdom when he said the profit is going away. He started in 1962 when John Deere created ‘floorplan financing’ and it continually declines. There are fewer farmers each year, but the same land to farm. The big get bigger, but 20% of the farmers will always exceed their debt capacity. So, someone is always begging for that ‘good deal,’ go ahead, sell yourself broke. Dealerships as well.

“Free enterprise is not free; this business is not Socialism or Marxism. It will cost someone their livelihood if you choose to make poor choices. It is always ‘greener’ on the other side of the fence when you look at the situation, but once you go there it is not. You have to have a business plan not a machinery plan. What works today will not work next year, everyone will catch on to the new change and competition will be in your face again. Now that we know the parameters, you have to allow the 20% to go broke because there will be a new 20% after that era. Anyone who believes that one machinery company can supply the best to all is a ‘fool,’ the Bible tells us this. Wholesale, auction, sell at a loss, buy back other items to replace that loss, junk out, force sales personnel to pre-sell trade. Use them all, why not. Never forget the ‘end game.’ We are here to enjoy life, have a family, enjoy friendship, have a hobby and spread the good word. Then go to bed and have a good nights sleep.”

— Bill Lano, Lano Equipment Inc., Loretto, Minn.

“Firstly, buy it right. Secondly, repair it in good running condition. If it was bought right, it should be able to absorb the cost. Thirdly, be sure the unit shows well. Fourthly, take out and demonstrate. It shows interest and is half sold at this point. Finally, have a finance plan available to present if needed.”

— Bill B., Parkland Farm Equipment Ltd., Stony Plain, Alberta

“Cut the price and make less profit. Advertising on free websites like Craigslist has helped us move a lot of equipment.”

— Dick Burmeister, Burmeister Farm Equipment Inc., Warren, Ill.

“There is no good strategy to ‘close the gate after the horse is out.’ What would be the levels of inventory of only those dealers who survived the ’80s?”

— Tim Brannon, B & G Equipment Inc., Paris, Tenn.

“We hold a yearly consignment auction and consign some of our used equipment in that auction. We have had great success in using Tractorhouse and, recently, we have started using Auctiontime.com to help move used equipment along with our website. We realize our customer’s time is valuable and we want them to be able to see our inventory 24/7. This gives our customers the ability to look when they have the time.”

— Jason Hephner, Witmers Inc., Columbiana, Ohio

“More advertising, web access, reduce margins.”

— Chuck Johnson, Pelican Tractor Co. Inc., Klamath Falls, Ore.

“Our used inventory at this location and time is in good shape. Depending on age and or condition, some goes to auction or we discount to move it on.”

— Warren Beery, Binkley Hurst, Dayton, Va.

“By far, the most effective sales tool is the Internet.”

— Drew Williamson, Doughty & Williamson Ltd., Jarvis, Ontario

“I agree used inventory is very high. We currently have very little used inventory resulting from a tornado in October. We feel very fortunate.”

— Bryan Reinhardt, Midland Equipment Inc., Wayne, Neb.

“We have, since May 2007, given up our New Holland Franchise to focus on the online attachment sales only as www.everythingattachments.com, and offer new implements and equipment with free shipping per our shipping policy, and are not able to take trade in attachments or equipment. In order to trade for used equipment, you would need to personally look at it, and if mechanized, see it operate to place a value on equipment and realize you can’t offer the selling price that your customer would be able to sell it for himself, and he buys it direct.”

— Rick Rinehardt, Everything Attachments, Newton, N.C.

“I don’t have a lot of used equipment, and some of it is on consignment. Know your market and price points, and make sure equipment is clean, no fluid leaks, good batteries, etc. Sometimes used equipment (trade-ins) is a necessary evil, but you have to be careful to not get buried in it, especially as a small dealer, because it can hinder cash flow. It helps to have good relationships with neighboring dealers, even if they are competitors, so if they have a customer that may be looking for something on your lot, they will call you.”

— Steve Brown, Everson Farm Equipment, Everson, Wash.

“We have written inventory down and we have taken some to auctions.”

— Lance Carlson, Quincy Tractor LLC, Quincy, Ill.

“The best strategy for moving used equipment is to buy it right when you take it on trade. I have seen a number of dealerships fail because they got so focused on ‘market share’ and ‘making the deal’ that they put too much money in their used equipment. A wise man once told me that in our industry, there are two things that will cause you to fail — receivables and used equipment. He was 100% right. Used equipment seldom improves with age. Sometimes we have to take our lumps on a trade-in to get it moved.”

— Mike McCrate, Tulsa New Holland, Tulsa, Okla.

“Knickerbocker has had great success selling used equipment. We have created great relationships with our customers and earned their trust by standing behind the equipment we sell, whether new or used. There have been occasions when customers purchased equipment and mechanical problems arose after the warranty on both new and used equipment. Knickerbocker and the customer would settle the issues, and in most cases, the issue settled in the customers favor. This allows the customer the comfort in knowing that their purchase is low risk and it encourages repeat business.”

— Sam Eaton, Knickerbocker Russell Co. Inc., Pittsburgh, Pa.

“The major reason is sales staff is so anxious to make the sale on a piece of new equipment and they give way too much for the trade-in. You are much better off having inventories of floorplan equipment than used equipment. That is money out of pocket the day you trade it. Used equipment goes down in value the day you receive it.”

— Karl Woerner, New Virginia Tractor, Charlottesville, Va